Seldom will you find a group of people that work harder and longer hours than small-business owners.  From servicing clients to submitting that bid on a new job, to making payroll, there is seemingly always one more thing to do each day before leaving work.  Business succession planning is rarely one of the top business items that keep owners working late, but it could be one of the most crucial things you could complete for your business. 

Simply, succession planning is the process of passing ownership/control of the business to another. The transition of ownership can be sudden, because of a death or disability, or it could take several years due to finding and training the right person to carry on a company’s legacy. It involves creating a comprehensive strategy to protect the value of your business for your family and future generations. By having a well-thought-out plan in place, you can safeguard your partners, employees, and clients from any disruptions that may arise during the transition.


  • 45% of Surveyed Small-Business Owner Have NO Succession Plan
  • 69% of Business Owners are Unprepared to Sell Their Business

Though 89% of business owners say their business will survive without them, only 55% have developed a formal transition plan.

What are the types of succession plans? Below is a brief description of the four most common types of plans that businesses implement. These plans can be tailored to meet the specific needs of your organization.

  • Family Succession Plan: This plan involves passing the business down to a family member or relative who is capable and willing to take over the reins. It often requires careful training and mentoring to ensure a seamless transition.
  • Management Buyout Plan: In this plan, the existing management team or key employees are given the opportunity to purchase the business. This can be an effective way to maintain the company’s culture and values while providing continuity.
  • Employee Stock Ownership Plan (ESOP): An ESOP allows employees to acquire ownership in the company through a trust fund. This plan can motivate and retain talented employees while providing a smooth transition of ownership.
  • Selling to a Third Party: If there are no suitable successors within the organization, selling the business to an external buyer can be a viable option. This plan requires careful evaluation and negotiation to ensure a fair and profitable sale.

Who can help develop a succession plan? It is important to know you are not alone in this process and should enlist the advice of tax and financial professionals to help along the way. Ideally, an Attorney, CPA, and Financial Advisor would work together with a business owner(s) to develop a plan that maximizes the value of the business, addresses all tax-related considerations, and meets all legal and financial requirements. They can also assist in determining when to implement the business succession plan. 

How important is the valuation of the business? Business valuation plays a vital role in succession planning. Accurately assessing the value of your business is essential for determining fair compensation, negotiating terms, and ensuring a smooth transition. Professional business appraisers can assist you in conducting a thorough valuation, taking into account factors such as assets, liabilities, cash flow, and market conditions. Many CPA firms have the ability and expertise to assess a business’s value and can make suggestions to help build additional value.

When should an Owner start creating their succession plan? Although you should start planning years in advance, many professionals suggest implementing the succession plan a minimum of 3-5 years in advance of the anticipated exit date. This gives owners ample time to find and train a replacement, maximize the company’s value, find a suitable buyer, and prepare the employees for the transition. Getting a head start could also help wait for ideal market conditions for a sale. 

What other considerations should be made? 

  • Know that the plan will most likely evolve. Setting up a comprehensive plan today does not mean that it cannot be a dynamic plan and change as your business evolves. Regularly review your plan with your financial team to make sure it is still relevant to your business. 
  • It is important to define what the leadership team currently does and what they will do after the transition. This can oftentimes be a complex process that has a number of factors to be considered.  A professionally facilitated process can be very helpful in identifying and navigating these emotions.
  • Talk to your family, support system, and leadership team so they are aware of your desires for the future of the business. For family businesses, family dynamics and business practices must be integrated into the strategic plan.
  • No matter what the plan, EXECUTE IT! A mediocre plan vigorously executed beats a great plan poorly executed every time!

Regardless of the type of plan chosen, it is crucial to start the succession planning process early. This allows for plenty of time to identify and groom potential successors, address any legal or financial considerations, and develop a comprehensive plan that ensures your hard work and legacy will continue to thrive even after you have stepped away from the business.

At Muncaster Financial Group, we specialize in helping business owners create comprehensive and dynamic succession plans that set business owners up for a successful transition into the next phase of their financial lives. Feel free to contact us to schedule a consultation and learn more about how succession planning can benefit you and your business. 

Disclaimer: This article may be incomplete and is intended for informational purposes only and should not be taken as legal/tax advice or opinion. Muncaster Financial Group provides tax and legal guidance but is not a legal advisor. Consult with an attorney, CPA, and financial advisor for estate and succession planning needs specific to your situation. 

Investment Advisory Services are offered through Investment Advisor Representatives of Cambridge Investment Research Advisors, Inc, a Registered Investment Adviser. Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC, to residents of AL, CO, FL, GA,  NC, SC, TN, VA, and NY. Cambridge and Muncaster Financial Group are not affiliated.